Page 26 - SWGas Annual Report 2015

issuance and sale of shares of the Company’s common stock (“Equity Shelf Program”). Sales of the shares will
continue to be made at market prices prevailing at the time of sale. Net proceeds from the sale of shares of
common stock under the Equity Shelf Program are intended for general corporate purposes, including the
acquisition of property for the construction, completion, extension or improvement of pipeline systems and facilities
located in and around the communities Southwest serves.

During 2015, 645,225 shares were issued in at-the-market offerings at an average price of $55.05 per share with
gross proceeds of $35.5 million, agent commissions of $355,000, and net proceeds of $35.2 million. See Note 6 –
Common Stock for more information.

During 2015, the Company issued approximately 209,000 additional shares of common stock collectively through
the Restricted Stock/Unit Plan, the Management Incentive Plan, and the Stock Incentive Plan. The Company raised
approximately $741,000 from the issuance of shares of common stock through the Stock Incentive Plan.

Three-Year Construction Expenditures, Debt Maturities, and Financing
Southwest estimates natural gas segment construction expenditures during the three-year period ending
December 31, 2018 will be between $1.4 billion and $1.6 billion. Of this amount, approximately $460 million is
expected to be incurred in 2016. Southwest plans to request regulatory support to accelerate projects that improve
system flexibility and reliability (including replacement of early vintage plastic and steel pipe). This will include
requests in California and Arizona to expand existing or initiate new programs. If successful, significant replacement
activities are expected to continue well beyond the next few years. See also Rates and Regulatory Proceedings for
discussion of Nevada infrastructure, California IRRAM, Arizona COYL, and an LNG facility. During the three-year
period, cash flows from operating activities of Southwest are expected to provide approximately 60% to 70% of the
funding for the gas operations total construction expenditures and dividend requirements. Any additional cash
requirements are expected to be provided by existing credit facilities and/or other external financing sources. The
timing, types, and amounts of any additional external financings will be dependent on a number of factors,
including the cost of gas purchases, conditions in the capital markets, timing and amounts of rate relief, growth
levels in Southwest’s service areas, and earnings. External financings could include the issuance of both debt and
equity securities, bank and other short-term borrowings, and other forms of financing.

Liquidity
Liquidity refers to the ability of an enterprise to generate sufficient amounts of cash through its operating activities
and external financings to meet its cash requirements. Several general factors (some of which are out of the control
of the Company) that could significantly affect liquidity in future years include: variability of natural gas prices,
changes in the ratemaking policies of regulatory commissions, regulatory lag, customer growth in the natural gas
segment’s service territories, Southwest’s ability to access and obtain capital from external sources, interest rates,
changes in income tax laws, pension funding requirements, inflation, and the level of Company earnings. Natural
gas prices and related gas cost recovery rates have historically had the most significant impact on Company
liquidity.

On an interim basis, Southwest defers over- or under-collections of gas costs to PGA balancing accounts. In
addition, Southwest uses these mechanisms to either refund amounts over-collected or recoup amounts under-
collected as compared to the price paid for natural gas during the period since the last PGA rate change went into
effect. During 2015, the PGA balance went from an under-collected balance of $87.6 million to an over-collected
balance of $42 million at December 31, 2015. See PGA Filings for more information.

Southwest Gas Corporation